Measuring efficiency in the Nigerian banking system: A critical review

Abstract

An efficient banking system is important for wealth creation, job creation, and trade facilitation, as it provides a way for individuals and businesses to participate in their local and global economy, thus facilitating economic growth and development. The purpose of this study is to examine the effectiveness of using data envelopment analysis (DEA) in measuring efficiency in the Nigerian banking system with the data envelopment analysis program. A critical review of selected peer-reviewed empirical studies was conducted. Papers were assessed to determine their inclusion or exclusion in the review process. For analytical purposes, the studies were generally grouped into two, namely, those that used one approach to measuring bank efficiency and those that used multiple approaches to measuring bank efficiency. Based on the critical review of extant literature conducted, findings suggest that there is a growing rate of adoption of DEA as a means of measuring bank efficiency in Nigeria, also that DEA has proved to be a scientific and effective means of measuring bank efficiency.

Keywords: Decision-making units, return to scale, scale efficiency, technical efficiency;